The tender process for the 24 helicopters will begin this year with a decision made next year. Deliveries are expected to start in 2014, a Department of Defense statement said.
The competition will likely be between Lockheed Martin/Sikorsky MH-60R and the NH Industries NH90, an industry report by FlightGlobal.com said.
The chosen helicopters are to replace 16 Seahawks and the navy's Super Seasprite project that was canceled in 2008 after falling seven years behind schedule and almost 50 percent over budget.
The purchase of the 24 helicopters will enable the navy to deploy at least eight more aircraft on ships at sea, FlightGlobal said.
The defense ministry statement also the government has given a "second pass approval" to acquire seven upgraded Chinook helicopters, costing around $672 million and to be in service by 2017. They will provide a deployable medium-lift capability up to 2040. The Chinooks will offer a range of improvements including a strengthened airframe to reduce airframe fatigue and digital systems to support safer flying.
The ministry is also to upgrade the air force's Hercules fleet through a multinational development program.
"Any decision government makes in 2011 will take into account all relevant considerations including capability, cost, interoperability with other Australian Defense Force capabilities, Australian industry opportunities, risk and value for money," Faulkner said.
The announcement comes as Greg Combet, minister for Defense, Personnel, Materiel and Science, said the government will continue to inject more "business-like behavior" when it comes to military purchases.
"Since the government implemented the Projects of Concern process, we have seen hard decisions taken and good results achieved, said Combet in his address to the Defense Industry Congress in Canberra this month.
"The Seasprite helicopter received the level of scrutiny necessary under Projects of Concern and the government took the tough decision to cancel the project with all the facts to hand."
Australia signed the Seasprite deal with Kaman Corp. in 1997. Australia signed an $595 million contract with Kaman Corp. to purchase 11 upgraded SH-2G Super Seasprites with modernized avionics. But the aircraft was, said many analysts, basically a 1960s airframe trying to cope with a plethora of modern avionics.
The first helicopter was unveiled in 2003 but dozens of problems, including the inability to operate in bad weather and low-light, and failure to meet Australian airworthiness certification, arose within two years.
The government hammered out a cancellation deal whereby Kaman owned the 11 helicopters, spare parts and associated equipment for sale on the open market, a government statement said at the time.
Profits are being shared on a 50-50 basis, with the government guaranteed a financial return from Kaman of at least $37 million. Australia also retains $27 million worth of spares for use on their Seahawk and Black Hawk helicopters.
The government estimates it saved $134 million that can now be used for other purchases.
The affair was a bruising experience for the government's procurement process and was a catalyst in its move toward more commercial awareness in contractual arrangements with suppliers.
Combet also said at the congress that the appointment of a general manager commercial within his department is "imminent." That person is to make the department "more business-like in its behavior and injecting industrial realities earlier in the capability development process."